Lifestyle Medical Network (LMNK) 10-Q 2010 Q2 Quarterly report

 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended   June 30, 2010

o    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to

Commission File Number:   0-52408

EMERGING MEDIA HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)

NEVADA	13-1026995
(State of other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1809 E. BROADWAY ST., SUITE 175, OVIEDA, FLORIDA	32765
(Address of principal executive offices)	(Zip Code)

(806) 688-9697

(Registrant's Telephone Number, Including Area Code)

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes  x No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes o    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company.  (Check One):

Large accelerated filer  o	Accelerated filer  o
Non-accelerated filer    o   (Do not check if a smaller reporting company)	Smaller reporting company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes  o No  x

As of August 1, 2010, there were 18,553,000 shares of Common Stock, $0.001 par value, outstanding.

Emerging Media Holdings, Inc. and Subsidiaries
Index
			Page
	PART I.	FINANCIAL INFORMATION
	Item 1.	Financial Statements	1
		Consolidated Balance Sheets as of June 30, 2010
		and December 31, 2009  (unaudited)	2
		Consolidated Statements of Operations for the
		Six and Three Months Ended June 30, 2010 and 2009 (Unaudited)	3
		Consolidated Statements of Comprehensive Income for the Six and Three Months ended June 30, 2010 and 2009 (Unaudited)	4
		Consolidated Statement of Stockholders' Equity for the Period Ended June 30, 2010 (Unaudited)	5
		Statement of Cash Flows for the Six Months  Ended June 30, 2010 and 2009 (Unaudited)	6-7
		Notes to Unaudited Financial Statements	8
	Item 2.	Management's Discussion and Analysis of Financial
		Condition and Results of Operations	21
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
	Item 4.	Controls and Procedures	25
	PART II.	OTHER INFORMATION	26
	Item 6.	Exhibits.	26
	Signatures		26

PART I—FINANCIAL INFORMATION

Item 1.  Financial Statements.

Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted from the following consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission.  It is suggested that the following consolidated financial statements be read in conjunction with the year-end consolidated financial statements and notes thereto included in the Company's Form 10-K for the year ending December 31, 2009.

The results of operations for the six and three months ended June 30, 2010 and 2009 are not necessarily indicative of the results for the entire fiscal year or for any other period.

-1-

EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
	June 30,			December 31,
	2010			2009
CURRENT ASSETS:
Cash and cash equivalents	$	356,569		$	647,861
Marketable securities		250,000			328,801
Accounts receivable - net of allowance for doubtful accounts of $204,000
and $246,000		662,344			3,578,358
Inventories		329,839			308,732
Employee receivables and other current assets		136,821			169,544
Total Current Assets		1,735,573			5,033,296
Property, plant and equipment, net		2,616,169			2,893,835
Restricted cash		530,011			720,888
Intangible assets - net		229,633			258,041
Goodwill		7,510,892			7,510,892
TOTAL ASSETS	$	12,622,278		$	16,416,952
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Notes payable	$	1,496,942		$	471,595
Accounts payable		1,849,075			3,772,888
Accrued expenses		242,621			374,094
Capitalized lease obligations		96,195			81,788
Customer deposits		162,700			552,851
Total Current Liabilities		3,847,533			5,253,216
LONG-TERM LIABILITIES:
Notes payable - less current portion above		-			1,165,087
Capitalized lease obligations - less current portion above		14,038			14,038
Total Long-Term Liabilities		14,038			1,179,125
TOTAL LIABILITIES		3,861,571			6,432,341
Commitments and Contingencies		-			-
EQUITY:
Emerging Media Holdings Inc. and Subsidiaries Stockholders' Equity:
Common stock, $.001 par value, 100,000,000 shares
authorized; 18,553,000 and 17,303,000 shares issued
at June 30, 2010 and December 31, 2009		18,553			17,303
Additional paid-in-capital		9,372,152			9,026,003
Retained earnings (deficit)		(557,447	)		721,510
Accumulated other comprehensive income (loss)		(102,802	)		(406,856	)
Less: Cost of common stock in treasury, 9,800 shares		(9,237	)		(9,237	)
Total Emerging Media Holdings Inc. and Subsidiaries Stockholders' Equity:		8,721,219			9,348,723
Noncontrolling interest		39,488			635,888
Total Equity		8,760,707			9,984,611
TOTAL LIABILITIES AND EQUITY	$	12,622,278		$	16,416,952

See notes to unaudited consolidated financial statements

-2-

EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	For The Six Months Ended June 30,						For The Three Months Ended June 30,
	2010			2009			2010			2009
Revenues	$	1,439,094		$	1,218,205		$	839,655		$	629,399
Costs and expenses:
Cost of sales		1,012,432			652,411			490,500			363,915
Selling, general and administrative expenses		514,790			549,662			247,039			60,157
		1,527,222			1,202,073			737,539			424,072
Income (loss) from operations		(88,128	)		16,132			102,116			205,327
Other income (expense):
Interest expense		-			(844	)		-			(150	)
Other income (principally interest income)		8,597			111,569			3,234			55,321
Gain on sale of fixed assets		-			-			-			-
		8,597			110,725			3,234			55,171
Earnings (loss) from continuing operations before		(79,531	)		126,857			105,350			260,498
provision for income taxes
Provision for income taxes		-			-			-			-
Earnings (loss) from continuing operations		(79,531	)		126,857			105,350			260,498
Discontinued operations (Note 18):
Loss from operations of SC Genesis
International S.A.		(1,477,882	)		-			(1,150,207	)		-
Net earnings (loss)		(1,557,413	)		126,857			(1,044,857	)		260,498
Less: Net earnings (loss) attributable to the
noncontrolling interest		(278,456	)		-			(212,921	)		-
Net earnings (loss) attributable to Emerging Media
Holdings, Inc. and Subsidiaries	$	(1,278,957	)	$	126,857		$	(831,936	)	$	260,498
Earnings (loss) per common share:
Earnings (loss) per common share attributable to
Emerging Media Inc. and Subsidiaries
common shareholders from continuing
operations - basic	$	(0.00	)	$	0.01		$	0.00		$	0.00
										��
Earnings (loss) per common share attributable to
Emerging Media Inc. and Subsidiaries
common shareholders from discontinued
operations - basic	$	(0.06	)	$	0.01		$	(0.05	)	$	0.00
Earnings (loss) per common share attributable to
Emerging Media Inc. and Subsidiaries
common shareholders from continuing
operations - diluted	$	(0.00	)	$	0.00		$	0.00		$	0.00
Earnings (loss) per common share attributable to
Emerging Media Inc. and Subsidiaries
common shareholders from discontinued
operations - diluted	$	(0.06	)	$	0.00		$	(0.05	)	$	0.00
Weighted average common shares - basic		18,205,778			16,303,000			18,553,000			16,303,000
Weighted average common shares - diluted		18,205,778			17,303,000			18,553,000			17,303,000

See notes to unaudited consolidated financial statements

-3-

EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
(Unaudited)
	For The Six Months Ended
	June 30,
	2010			2009
Net earnings (loss)	$	(1,557,413	)	$	126,857
Other comprehensive income (loss) - net of tax:
Currency translation adjustment		333,509			(204,652	)
Comprehensive income (loss)		(1,223,904	)		(77,795	)
Comprehensive income (loss) attributable to noncontrolling
interest		(153,663	)		-
Comprehensive income (loss) attributable to Emerging
Media Inc. and Subsidiaries	$	(1,377,567	)	$	(77,795	)

See notes to unaudited consolidated financial statements

-4-

EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EQUITY
(Unaudited)
																						Accumulated
							Preferred Stock						Common Stock						Retained			Other
				Comprehensive			Number of						Number of				Additional Paid		Earnings			Comprehensive			Treasury			Noncontrolling
	Total			Income			Shares			Amount			Shares		Amount		In Capital		(Deficit)			Income (Loss)			Stock			Interest
Balance, January 1, 2009	$	9,890,609						1,000,000		$	4,000,000			16,303,000	$	16,303	$	5,027,003	$	693,547		$	162,993		$	(9,237	)	$	-
Conversion of preferred stock		-						(1,000,000	)		(4,000,000	)		1,000,000		1,000		3,999,000
Noncontrolling interest		587,230																											587,230
Net earnings year ended
December 31, 2009		76,621		$	76,621															27,963									48,658
Currency translation		(569,849	)		(569,849	)																	(569,849	)
Comprehensive loss				$	(493,228	)
Balance, December 31, 2009		9,984,611						-			-			17,303,000		17,303		9,026,003		721,510			(406,856	)		(9,237	)		635,888
Issuance of common stock
for acquisition														1,250,000		1,250		346,149					(29,455	)					(317,944	)
Net loss six months ended
June 30, 2010		(1,557,413	)	$	(1,557,413	)														(1,278,957	)								(278,456	)
Currency translation		333,509			333,509																		333,509
Comprehensive loss				$	(1,223,904	)
Balance, June 30, 2010	$	8,760,707						-		$	-			18,553,000	$	18,553	$	9,372,152	$	(557,447	)	$	(102,802	)	$	(9,237	)	$	39,488

See notes to unaudited consolidated financial statements

-5-

EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	For The Six Months Ended
	June 30,
	2010			2009
Cash flows from operating activities:
Net earnings (loss)	$	(1,557,413	)	$	126,857
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization		343,253			57,488
Loss (gain) on disposition of fixed assets		(975	)		-
Changes in operating assets and liabilities:
(Increase) decrease in trade receivables		2,923,824			(148,221	)
(Increase) decrease in inventories		(75,732	)		69
(Increase) decrease in employee receivables and other
current assets		32,903			(72,295	)
Decrease in restricted cash		190,877			-
(Decrease) increase in accounts payable,
accrued liabilities and income taxes payable		(1,670,874	)		53,836
(Decrease) in customer deposits		(390,151	)		-
Net Cash (Used In) Provided by Operating
Activities		(204,288	)		17,734
Cash flows from investing activities:
Purchase of property, plant and equipment		(37,179	)		(87,698	)
Proceeds from sale of fixed assets		5,217			-
Proceeds from sale of marketable securities		78,101			-
Repayment of loans by employees		-			7,587
Advances on note receivable		-			(500,000	)
Net Cash Provided by (Used In) Investing Activities		46,139			(580,111	)
Cash flows from financing activities:
Proceeds from loans		1,080,745			-
Repayment of debt - related parties		-			(18,233	)
Repayment of debt		(1,260,028	)		(1,905	)
Net Cash (Used In) Financing Activities		(125,333	)		(20,138	)
Effect of exchange rate changes on cash		(7,810	)		(35,190	)
Net (decrease) in cash		(291,292	)		(617,705	)
Cash and cash equivalents - Beginning of period		647,861			1,334,738
Cash and cash equivalents - End of period	$	356,569		$	717,033

See notes to unaudited consolidated financial statements

-6-

EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
	For The Six Months Ended
	June 30,
	2010		2009
Supplemental disclosure cash flow information:
Cash paid for interest	$	127,962	$	844
Cash paid for income taxes	$	-	$	-

See notes to unaudited consolidated financial statements

-7-

EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated balance sheet as of June 30, 2010 and the consolidated statements of operations, stockholders' equity and cash flows for the periods presented have been prepared by Emerging Media Holdings, Inc. (the "Company" or "EMH") and are unaudited.  In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position, results of operations, changes in stockholders' equity and cash flows for all periods presented have been made.  The information for the consolidated balance sheet as of December 31, 2009 were derived from audited financial statements.

Organization

Emerging Media Holdings, Inc. (the "Company" or "EMH") was incorporated in the State of Nevada on September 3, 2003.  The Company operates in two industries, each in its own geographic area. The Company directs its operations through its subsidiaries located in Moldova and Romania.  Through its Moldovan subsidiaries, the Company's primary activities are in radio and television broadcasting.  The Company was granted a broadcasting license in 2005 which extends through 2011 and earns revenue primarily through advertisement sales.  Through its Romanian subsidiary, the Company supplies infrastructure projects to highways and roads throughout Romania using a road base material.

On August 3, 2010, the Company entered into a Purchase Agreement with Stipula Financial Inc., a British Virgin Islands corporation, (“Stipula Financial”), pursuant to which Stipula Financial agreed to purchase from the Company eighty (80%) percent of the outstanding shares of SC Genesis International S.A. owned by the Company.  The consideration for the sale of the Company’s 80% interest in Genesis under the Purchase Agreement was the assignment and transfer to the Company by certain of the Company’s shareholders of 8,413,400 shares of the Company’s common stock.  The closing will be consummated during the third quarter of 2010.

Basis of Presentation

Reporting and functional currency

The Company has determined that the United States dollar (“USD") is the reporting currency for the purposes of financial reporting under US GAAP.

The local currency and the functional currency of the subsidiaries of the Company is the Moldovan Lei ("MOL") and the Romanian Lei ("RON").

Any conversion of MOL and RON amounts to USD should not be construed as a representation that such MOL and RON amounts have been, could be, or will in the future be converted into USD at the current exchange rate or at any other exchange rate.

Recent Accounting Pronouncements

The Company’s significant accounting policies are summarized in Note 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.  There were no significant changes to these accounting policies during the six months ended June 30, 2010 and the Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.

2. ACQUISITIONS

a) On October 1, 2009, the Company consummated an acquisition of 60% of the outstanding shares of SC Genesis International S.A. ("Genesis") owned by IPA International Project Establishment.  The consideration paid by the Company for the acquisition of Genesis was approximately $4,800,000.

-8-

EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

Genesis, a joint stock company incorporated under the laws of Romania, has as its principal business, the construction of roads and highways.  Other secondary activities include surface and underground railway construction, other special construction projects, relocation services and merchandise transportation.

The fair value of the identifiable assets acquired, liabilities assumed, and any noncontrolling interests in Genesis has been measured as of the date of acquisition.  The measurement period is the period after the acquisition date during which time the Company may adjust the provisional amounts recognized for the business combination.  Goodwill has been recognized as the excess of the fair value of the consideration transferred over the fair value of the identifiable assets acquired and the liabilities assumed.  The Company accounted for acquisition-related costs as expenses in the periods in which the costs were incurred and the services were received.

The following table presents the allocation of the acquisition cost to the assets acquired and liabilities assumed, based on their fair values.

At October 1, 2009
Purchase price
Exchange of note receivable	$	4,280,498
Note payable		471,595
Total consideration			$	4,752,093
Allocation of purchase price:
Cash				47,511
Accounts receivable				6,162,295
Inventories				571,823
Other current assets				158,007
Property, plant and equipment				3,061,537
Restricted cash				850,267
Goodwill				3,871,247
Total Assets Acquired				14,722,687
Notes payable - current				539,011
Accounts payable				5,185,742
Customer advances				598,582
Accrued expenses				343,857
Capitalized lease obligations				91,384
Notes payable - long-term				2,624,788
Non-controlling interests				587,230
Total Liabilities Assumed			$	9,970,594
Net Assets Acquired			$	4,752,093

b) On February 20, 2010, the Company acquired 20% of the outstanding common stock of Genesis held by the noncontrolling interests in exchange for 1,250,000 shares of common stock of Emerging Media Holdings, Inc., valued at $500,000, the fair value of the common stock at the date of issuance.  The purchase has been accounted for as an equity transaction in accordance with ASC 840-10-45-23, "Business Combinations".  The noncontrolling interest and other comprehensive income has been reduced by $347,399 and credited to the equity of EMH.

c) On August 3, 2010, the Company entered into an agreement to sell its 80% interest in Genesis.  The consideration for the sale was the assignment and transfer to the Company by certain of the Company’s shareholders of 8,413,400 shares of the Company’s common stock.

-9-

EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

d) On May 2, 2008, the Company acquired the common stock of Media Top Prim S.R.L. (LLC) (“Media Top Prim”), located in Moldova, for 1 million shares of the Company’s preferred stock of a class and series to be authorized, valued at $4.0 million.  The preferred shares are convertible into common shares on a 1:1 basis after a holding period of one year.  Media Top Prim’s primary activities are in radio and television broadcasting.  Media Top Prim earns its revenues primarily through advertisement sales.  Media Top Prim was granted a broadcasting license on April 24, 2007 which extends to April 24, 2013.  The purchase price was allocated to both tangible and intangible assets and liabilities based on estimated fair values after considering an independent formal appraisal.

The acquisitions have been accounted for using the purchase method of accounting, and accordingly, the results of operations of Media Top Prim and Genesis are included in the Company’s consolidated financial statements from the date of their acquisitions.

The following unaudited pro forma summary of results of operations assume Genesis had been acquired as of January 1, 2009:

	Six Months
	Ended
	June 30, 2009
Net sales	$	4,320,795
Net loss		(631,829	)
Loss per share -		-
diluted	$	(0.03	)

The information above is not necessarily indicative of the results of operations that would have occurred if the acquisition had been consummated as of January 1, 2009.  Such information should not be construed as a representation of the future results of operations of the Company.

3. EARNINGS PER SHARE

Basic earnings per common share are computed by dividing net earnings by the weighted average number of common shares outstanding during the period.  Diluted earnings per common share are computed by dividing net earnings by the weighted average number of common shares and potential common shares outstanding during the period.  Potential common shares used in computing diluted earnings per share relate to preferred stock which if exercised would have a dilutive effect on earnings per share.  For the six and three months ended June 30, 2010 and 2009, there were -0- and 1,000,000 shares, respectively, potential common shares outstanding.

The weighted average shares outstanding used in the computation of basic and diluted earnings per share are as follows:

	Six Months Ended				Three Months Ended
	June 30,				June 30,
	2010		2009		2010		2009
Basic		18,205,778		16,303,000		18,553,000		16,303,000
Potential shares		-		1,000,000		-		1,000,000
Fully diluted		18,205,778		17,303,000		18,553,000		17,303,000

4.           FAIR VALUE MEASUREMENTS

The Company utilizes the accounting guidance for fair value measurements and disclosures for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the condensed consolidated financial statements on a recurring basis or on a nonrecurring basis during the reporting period.  The fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based upon the best use of the asset or liability at the measurement date.  The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability.  The accounting guidance establishes a three-tier fair val ue hierarchy, which prioritizes the inputs used in measuring fair value.  These tiers are defined as follows:

Level 1 -  Observable inputs such as quoted market prices in active markets

Level 2 -  Inputs other than quoted prices in active markets that are either directly or indirectly observable

Level 3 - Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions

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EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

As of June 30, 2010, the Company held certain financial assets that are measured at fair value on a recurring basis.  These consisted of cash and cash equivalents, investments in marketable securities and restricted cash.  The fair values of the cash and cash equivalents and restricted cash is determined based on quoted market prices in public markets and is categorized as Level 1.  The investment in marketable securities is determined by the Company based on market prices other than quoted prices in active markets and is categorized as Level 2.  These are also categorized as held-to-maturity securities.  The Company does not have any financial assets measured at fair value on a recurring basis as Level 3 and there were no transfers in or out of Level 1, Level 2 or Level 3 during the si x months ended June 30, 2010 and 2009.

The following table sets forth by level, within the fair value hierarchy, the Company’s financial assets accounted for at fair value on a recurring basis as of June 30, 2010 and December 31, 2009.

			Assets at Fair Value as of June 30, 2010 and December 31, 2009 Using
			Quoted Prices in		Significant
			Active Markets		Other		Significant
			for Identical		Observable		Observable
			Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 2)
June 30, 2010
Cash and cash equivalents	$	356,569	$	356,569	$	-	$	-
Held-to-maturity securities		250,000		-		-		250,000
Restricted cash		530,011		530,011		-		-
Total	$	1,136,580	$	886,580	$	-	$	250,000
December 31, 2009
Cash and cash equivalents	$	647,861	$	647,861	$	-	$	-
Held-to-maturity securities		328,801		-		-		328,801
Restricted cash		720,888		720,888		-		-
Total	$	1,697,550	$	1,368,749	$	-	$	328,801

The Company has other financial instruments, such as receivables, accounts payable and other liabilities which have been excluded from the tables above.  Due to the short-term nature of these instruments, the carrying value of receivables, accounts payable and other liabilities approximate their fair values.  The Company did not have any other financial instruments with the scope of the fair value disclosure requirements as of June 30, 2010.

Non-financial assets and liabilities, such as goodwill and long-lived assets, are accounted for at fair value on a nonrecurring basis.  These items are tested for impairment on the occurrence of a triggering event or in the case of goodwill, on at least an annual basis.  The Company's annual test on its long-lived assets indicated that the carrying value of its long-lived assets was recoverable and that no impairment existed as of the testing date.  On August 3, 2010, the Company entered into an agreement to sell its Genesis subsidiary.  Management determined the triggering event will not have a material effect on the value of its goodwill connected to the Genesis acquisition.

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EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

 5.           JOINT VENTURE

In August 2008, the Company announced the creation of a new advertising company, Alkasar Media Services S.R.L. ("Alkasar")  The Company and Alkasar Region LLC have agreed to become partners to promote new advertising technologies in Republic of Moldova in the media buying business, each owning a 50% interest in the joint venture.

The joint venture has been funded through the initial share capital from each of the investors.  If additional capital is needed, the joint venture will raise the additional capital from contributions in share capital or loans from the shareholders.  If one shareholder does not want to fund the joint venture, it is not obligated to invest the money.

The joint venture shall make annual distributions to the joint venture partners.  The distribution is up to the discretion of the general manager of the joint venture within 30 days following the end of the fiscal year.  The general manager is not allowed to make distributions if it is for the full payment of the share capital or if the result of the distribution the assets would be less than the amount of the share capital.  For the six months ended June 30, 2010 and 2009, no distributions were made.

As of June 30, 2010, Alkasar had assets of $335,352 and liabilities of $293,058.

Alkasar Region LLC is affiliated with Gazprom - Media JSC advertising agency, selling advertising in more then 80 of the largest Russian cities, such as Moscow, St. Petersburg and others.

6.              GOODWILL AND INTANGIBLES

Goodwill represents the excess of the purchase price and related acquisition costs over the value assigned to the net intangible and other intangible assets with finite lives acquired in a business acquisition.

Other intangibles include the value assigned to the license purchased as part of the acquisition of Media Top Prim. Amounts assigned to these intangibles were determined by management.  Management considered a number of factors in determining the allocations, including valuations and independent appraisals.  Other intangibles are being amortized over 7 years, the life of the license.  Amortization expense was $28,408 and $28,408, for the six months ended June 30, 2010 and 2009, respectively.

The changes in the carrying value of goodwill for the six months ended June 30, 2010 is as follows:

	Total
Balance, December 31, 2009	$	7,510,892
Adjustment		-
Balance, June 30, 2010	$	7,510,892

Nonfinancial assets and liabilities, such as goodwill and long-lived assets, are accounted for at fair value on a non recurring basis.  These items are tested for impairment upon the occurrence of a triggering event or in the case of goodwill, on at least an annual basis.  On August 3, 2010, the Company entered into an agreement to sell its Genesis subsidiary.  Management determined the triggering event will not have a material effect on the value of its goodwill connected to the Genesis acquisition.

For the annual goodwill impairment assessment performed in 2009, the Company’s fair value analysis was supported by a weighting of two generally accepted valuation approaches, including the income approach and the market approach, as further described below.  These approaches include numerous assumptions with respect to future circumstances, such as industry and/or local market conditions that might directly impact operations in the future, and are therefore uncertain.  These approaches are utilized to develop a range of fair values and a weighted average of these approaches is utilized to determine the best fair value estimate within that range.

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EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

The components of intangible assets other than goodwill are as follows:

	June 30, 2010				December 31, 2009
	Gross Carrying		Accumulated		Gross Carrying		Accumulated
	Amount		Amortization		Amount		Amortization
License agreements	$	348,000	$	118,367	$	348,000	$	89,959

Estimated amortization expense for intangible assets for the next five years is as follows:

Year Ending	Amortization
December 31,	Expense
2010		24,857
2011		49,714
2012		49,714
2013		49,714
2014		49,714

7.              MARKETABLE SECURITIES

At June 30, 2010 and December 31, 2009, marketable securities have a cost and estimated fair value of $250,000 and $328,801, respectively.  The market value of the marketable securities did not change as the securities were fixed yield bonds with a fixed price and fixed interest rate.  The investments are held-to-maturity and are recorded at cost, which approximates market value.  During the first quarter of 2010, bonds in the amount of $78,801 matured and were not renewed.  The balance of the bonds mature in September 2010.

8.              NOTES RECEIVABLE

On November 7, 2008, the Company entered into a loan agreement with IPA International Project Establishment, a Lichtenstein corporation (“IPA”).  The Company advanced IPA $3,840,000.  In June 2009, IPA assumed the debt owed by a Romanian entity to the Company in the amount of $253,740 in connection with a terminated acquisition agreement.    The term of the loan was originally for six months with interest at a rate of 5% per anum payable at maturity.  The loan had been extended to October 2009.  On October 1, 2009, the Company consummated an acquisition of 60% of the outstanding shares of SC Genesis International S.A. owned by IPA.  The outstanding note receivable, including interest of $186,758, in the amount of $4,280,498 was applied against the purchas e price.  See Note 2 for further information.  For the six months ended June 30, 2009, the Company recorded interest income of $96,000.

In June 2009, the Company entered into a loan agreement with SC Genesis International SA.  The Company advanced SC Genesis International SA $500,000.  Subsequent to the acquisition of Genesis, the note receivable is an intercompany transaction.  See Note 1, Principles of Consolidation.

9.              INVENTORIES

In accordance with FASB ASC 360-15-35, "Impairment or Disposal of Long-Lived Assets", ("ASC 360-15"), the Company records impairment losses on inventory related to projects under development when events and circumstances indicate that they may be impaired and the undiscounted cash flows estimated by these assets are less than their related carrying amounts.  The Company recorded no impairments for the six months ended June 30, 2010.

As of June 30, 2010 and December 31, 2009, inventory consists of the following:

	June 30,		December 31,
	2010		2009
Raw materials	$	103,908	$	94,315
Capitalized costs		168,626		186,249
Advance payments to contractors		57,305		28,168
	$	329,839	$	308,732

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EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

10.              PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, which includes amounts recorded under capital leases, consisted of the following:

	June 30,		December 31,
	2010		2009
Machinery and equipment	$	3,211,048	$	3,094,484
Transportation equipment		514,563		602,929
Building and building improvements		23,377		21,187
		3,748,988		3,718,600
Less accumulated depreciation		1,132,819		824,765
	$	2,616,169	$	2,893,835

Depreciation expense for the six months ended June 30, 2010 and 2009 totalled $308,054 and $29,080, respectively.

11.              RESTRICTED CASH

Restricted cash are the guarantees for the work performed by the Company.  The performance guarantees range between 5% and 10% of the contract price.  The warranty period can be as long as sixty months but amounts are released on a predetermined schedule.  Restricted cash as of June 30, 2010 and 2009 amounted to $530,011 and $720,888, respectively.

12.             NOTES PAYABLE

Notes payable balance as of June 30, 2010 and December 31, 2009 were as follows:

	June 30,		December 31,
	2010		2009
Note payable to Romanian International Bank,	$	1,025,347	$	1,165,087
interest @ 20.5%, due February 2011 (1)
Note payable to IPA, interest @ 5%, due		471,595		471,595
upon demand (2)
		1,496,942		1,636,682
Less: Current portion		1,496,942		471,595
	$	-	$	1,165,087

(1) The note payable is collateralized by equipment owned by the Company with a book value of approximately $1.5 million and cash flow of one of the Company's current projects.

(2) Note payable in connection with the acquisition of 60% of Genesis.

Interest expense related to Notes Payable for the six months ended June 30, 2010 and 2009 amounted to $125,460 and $-0-, respectively.

The following table shows the maturities by year of the total amount of notes payable at June 30, 2010:

Year ending December 31,
2010	$	471,595
2011		1,025,347
	$	1,496,942

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EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

13.              CAPITALIZED LEASE OBLIGATIONS

Property under lease:

	June 30,		December 31,
	2010		2009
Equipment	$	337,818	$	237,818
Less: Accumulated depreciation		42,692		23,526
	$	295,126	$	214,292

The following is a schedule of minimum future lease payments required as of June 30, 2010, under capital leases which have an initial or remaining non-cancellable lease term in excess of one year:

Fiscal year ending:
2010	$	80,116
2011		47,900
2012		11,874
2013		-
2014		-
Thereafter		-
Total minimum lease payments		139,890
Less current representing interest		29,657
Present value of net minimum
lease payment		110,233
Less current obligations		96,195
Long-term obligations	$	14,038

Interest expense related to Capitalized Lease Obligations for the six months ended June 30, 2010 and 2009 was $2,502 and $390, respectively.

14.              NONCONTROLLING INTEREST

Effective January 1, 2009, the Company completed its implementation of FASB ASC 810.

The following table sets forth the noncontrolling interest balance and the changes to this balance attributable to the third-party interests in Alkasar Media Services S.R.L. and SC Genesis International S.A.

	June 30,			December 31,
	2010			2009
Balance at beginning of period	$	635,888		$	-
Noncontrolling interest from the acquisition of
60% of Genesis International S.A. in 2009		-			587,230
Adjustment of noncontrolling interest in connection
with the acquisition of 20% of Genesis
International S.A. in 2010		(317,944	)		-
Noncontrolling interest share of income (loss)		(278,456	)		48,658
Balance at end of period	$	39,488		$	635,888

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EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

The loss for 2008 of Alkasar exceeded the capital of the third party.  Losses are only allocable to the extent of capital.  Any excess losses are absorbed by the Company.  In future periods, net income will be allocated to previous unallocated losses before being allocated to third party interests.

15.              INCOME TAXES

The Company adopted the provisions of ASC 740 on January 1, 2007.  As a result of the implementation of ASC 740, the Company recognized no adjustment in the net liability for unrecognized income tax benefits.  The Company believes there are no potential uncertain tax positions and all tax returns are correct as filed.  Should the Company recognize a liability for uncertain tax positions, the Company will separately recognize the liability for uncertain tax positions on its balance sheet.  Included in any liability for uncertain tax positions, the Company will also setup a liability for interest and penalties.  The Company’s policy is to recognize interest and penalties related to uncertain tax positions as a component of the current provision for income taxes.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions.  The Company is no longer subject to U.S. federal examinations by tax authorities for years before 2006 and for state examinations before 2005.   Regarding foreign subsidiaries, the Company is no longer subject to examination by tax authorities for years before 2007 in Europe.  The Company is not currently being audited by any tax authorities.

The nominal statutory corporate rate in the Republic of Moldova is 0% for 2010 and 2009.   Taxes are calculated in accordance with Moldovan regulations and are paid annually.   Taxes are calculated on a separate entity basis since consolidation for tax purposes is not permitted in Moldova.  The nominal statutory tax rate in the Romanian Republic is 25%.  Taxes are calculated in accordance with Romanian regulations and are paid annually.  There is no U.S. tax provision due to losses during both 2009 and 2008.  Deferred income taxes are provided for the temporary differences between the financial reporting and tax basis of the Company's assets and liabilities. The principal item giving rise to deferred taxes is the net operating loss carryforward in the U.S.   ;Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.  The Company has set up a valuation allowance for losses for certain carryforwards that it believes may not be realized.

The President of the United States has presented a budget to the United States Congress which contains various modifications to international tax provisions.  Some of the proposed changes might subject the Company to, among other things, additional income taxes, restrictions on how foreign tax credits would be calculated and affect taxation regarding the transfer of intangible property.  The Company cannot ascertain at this time what the final outcome of this proposed legislation will be of the effect, if any, on the Company's results of operations or financial condition.  Additionally, the Internal Revenue Service ("IRS") released a draft tax schedule and instructions that provide additional details on its proposal to require companies with assets of $10.0 million or more to report their uncertain tax pos itions annually, beginning with the 2010 tax year on their business tax returns.

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EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

16.              STOCKHOLDERS' EQUITY

Preferred Stock

The Company authorized 1,000,000 shares of preferred stock to be designated for issuance in connection with the acquisition of Media Top Prim.  The preferred shares were convertible into common shares on a 1:1 basis.  In 2009, the 1,000,000 preferred shares were converted into 1,000,000 common shares.  As of June 30, 2010, no preferred shares were outstanding.

Treasury Stock

On September 22, 2008, the Board of Directors authorized the Company to purchase shares of the Company's common stock in the open market.  As of June 30, 2010, the Company repurchased 9,800 shares in the amount of $9,237.  No shares have been repurchased subsequent to June 30, 2010.

17.              DISCONTINUED OPERATIONS

On August 3, 2010, the Company entered into an agreement to sell its 80% owned subsidiary, Genesis.  The Company will receive 8,413,400 shares of its common stock from certain of its shareholders as proceeds in connection with the sale.  Any gain or loss upon the sale will be recognized in the quarter ending September 30, 2010.

The operating results of Genesis have been classified as discontinued operations and are summarized as follows:

	Six Months Ended					Three Months Ended
	June 30,					June 30,
	2010			2009		2010			2009
Sales	$	283,333		$	-	$	283,333		$	-
Loss before income tax benefit		(1,477,882	)		-		(1,150,207	)		-
Loss from discontinued operations		(1,477,882	)		-		(1,150,207	)		-

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EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

Details of balance sheet items for Genesis are summarized below:

	June 30,		December 31,
	2010		2010
Cash	$	16,643	$	257,873
Accounts receivable		277,222		3,289,029
Inventories		301,960		295,427
Other current assets		136,644		169,545
Total Current Assets	$	732,469	$	4,011,874
Property, plant and equipment	$	2,107,138	$	2,259,778
Restricted cash		530,011		720,888
Total Non-Current Assets	$	2,637,149	$	2,980,666
Current portion of long-term debt	$	1,025,347	$	-
Accounts payable		1,725,214		3,732,076
Accrued expenses		418,508		776,328
Total Current Liabilities	$	3,169,069	$	4,508,404
Long-term debt	$	14,038	$	1,179,125
Minority interests	$	18,321	$	635,888

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EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

18.              BUSINESS SEGMENT INFORMATION

FASB ASC 280-10-10, "Segment Reporting" ("ASC 280-10-10"), established standards for reporting information about operating segments.  Operating segments are defined as components of an enterprise about which separate financial information is available is evaluated regularly by management.  The Company is organized by geographical area and industry segment.

	Six Months Ended					Three Months Ended
	June 30,					June 30,
	2010			2009		2010		2009
Net Revenue by Geographic Areas:
United States	$	-		$	-	$	-	$	-
Europe		1,439,094			1,218,205		839,655		629,399
	$	1,439,094		$	1,218,205	$	839,655	$	629,399
Net Revenue by Industry Segment:
Media	$	1,439,094		$	1,218,205	$	839,655	$	629,399
Road construction		-			-		-		-
	$	1,439,094		$	1,218,205	$	839,655	$	629,399
Income (loss) From Operations:
Media	$	(88,128	)	$	16,132	$	102,116	$	205,327
Road construction		-			-		-		-
	$	(88,128	)	$	16,132	$	102,116	$	205,327
Total Assets:	June 30, 2010			December 31, 2009
United States	$	308,821		$	1,082,322
Europe		12,313,457			15,334,630
	$	12,622,278		$	16,416,952

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EMERGING MEDIA HOLDINGS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

19.             COMMITMENTS AND CONTINGENCIES

a) Contracts

1) The Company entered into a retransmission rights agreement with Russian Broadcasting Channels JSC “NTV” and JSC “NTV-Mir” owned by Gazprom Media, a wholly-owned subsidiary of the GazProm Corporation (a related party to Alkasar Region LLC, a 50% investor in Alkasar Media Services S.R.L.), to retransmit programs from these television networks. The contract is on a long term basis through 2010 and the Company will pay $458,532 per year. For the six months ended June 30, 2010 and 2009, the Company expensed $229,266 and $153,566, respectively.

2) The Company entered into a retransmission rights agreement with Russian Broadcasting Channel JSC “TNT-Teleset” owned by Gazprom Media, a wholly-owned subsidiary of GazProm Corporation (a related party to Alkasar Region LLC, a 50% investor in Alkasar Media Services S.R.L.) to retransmit programs from this television network. The contract is on a long term basis through 2012 and the Company will pay $378,400 in 2010. For the six months ended June 30, 2010 and 2009, the Company expensed $189,200 and $129,000, respectively.

20.            LEGAL PROCEEDINGS

The Company is a defendant in a lawsuit captioned Case File No. 44.952/3/2007, Compania Nationala de Autostrazi si Drumuri Nationale in Romania ("CNADR") vs. Genesis International S.A., brought before ICCJ - Commercial Department.  CNADR has asked the court for the Company to pay $217,238 as a penalty for delay in the execution of the works set forth in Contract No. 2187/2003 - "Primary Rehabilitation of DN 58 Caransebes - Anina" and in Contract No. 2185/2003 - "Primary Rehabilitation of DN 41 Dara - Oltenita".  On April 15, 2010, the Supreme Court annulled the case file.  The communication is expected to be drafted and presented within one month.

We are a defendant in Case File No. 13704/302/2009, SC Trans AMD Company SRL vs. Genesis, brought in the District No.5, Bucharest Court of Law. The object of the hearing is the collection letter for the amount of 61,507 RON or the equivalent of $20,948. The plaintiff’s request has been partially admitted on February 10, 2010, and we have accrued and plan to pay this obligation.

We are a defendant in Case File No. 14657/3/2010, SC Angely Construct SRL vs. Genesis. The object of the hearing is the recovery of the amount of 495,169 RON or the equivalent of $168,648. A hearing was set for September 23, 2010. We have accrued and plan to pay this obligation.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and notes thereto and the other financial information included elsewhere in this report.  Certain statements contained in this report, including, without limitation, statements containing the words “believes,” “anticipates,” “expects” and words of similar import, constitute “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements involve known and unknown risks and uncertainties.  Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including our ability to create, s ustain, manage or forecast our growth; our ability to attract and retain key personnel; changes in our business strategy or development plans; competition; business disruptions; adverse publicity; and international, national and local general economic and market conditions.

Overview

Organization

Emerging Media Holdings, Inc was incorporated in the State of Nevada on September 3, 2003. The Company directs its operations through its subsidiaries, IM “Media Alianta” SRL  (formerly SC “Cabavarum” SRL), SA “Analytic Media Group”, ("AMG"), ICS “Media Top Prim SRL”, ICS “Alkasar Media Services SRL” and SC Genesis International SA, a joint stock company incorporated under the laws of Romania (“Genesis”). All subsidiaries' operations and assets are located in the Republic of Moldova, other than those of Genesis which are located in Romania. Through its Moldova subsidiaries, the Company's primary activities are in radio and television broadcasting and through Genesis, road construction in Romania. The Company earns its revenue primarily through advertisement sales revenues and from road construction contracts.

Basis of Presentation

Throughout this Form 10-Q, the terms "we," "us," "our," "EMH" and "Company" refer to Emerging Media Holdings, Inc., a Nevada corporation, and, unless the context indicates otherwise, includes our subsidiaries.

Recent Developments

On October 1, 2009, we closed an acquisition of 60% of the outstanding shares of Genesis, which has as its principal business the construction of roads and highways in Romania, from IPA International Project Agency Establishment, a Lichtenstein corporation (“IPA”), pursuant to a Share Purchase Agreement (the “Agreement”), executed as of June 10, 2009, by and between the Company and Genesis. On November 7, 2008, the Company had entered into a loan agreement with IPA, and the Company had advanced IPA $3,840,000. In June 2009, IPA assumed the debt owed by a Romanian entity to the Company in the amount of $253,740 in connection with a terminated acquisition agreement. As of September 30, 2009, IPA owed the Company $4,093,740 plus interest of $146,757. On October 1, 2009, the Company closed the acquisition of 60% of the outstanding shares of Genesis International owned by IPA for $4,800,000, and the outstanding note receivable was applied against the purchase price. Effective February 23, 2010, we acquired an additional 20% of the outstanding shares of Genesis, in exchange for 1,250,000 shares of our common stock.

On August 3, 2010, the Company entered into a Purchase Agreement with Stipula Financial Inc., a British Virgin Islands corporation, (“Stipula Financial”), pursuant to which Stipula Financial agreed to purchase from the Company eighty (80%) percent of the outstanding shares of SC Genesis International S.A. owned by the Company.  The consideration for the sale of the Company’s 80% interest in Genesis under the Purchase Agreement is the assignment and transfer to the Company by certain of the Company’s shareholders of 8,413,400 shares of the Company’s common stock.  The closing will be consummated during the third quarter of 2010.

Critical Accounting Policies and Estimates

Our significant accounting policies are more fully described in Note 1 of Notes to the Consolidated Financial Statements.  However, certain accounting policies and estimates are particularly important to the understanding of the our financial position and results of operations and require the application of significant judgment by our management or can be materially affected by changes from period to period in economic factors or conditions that are outside the control of management.  As a result they are subject to an inherent degree of uncertainty. In applying these policies, our management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate.

-21-

The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses from the inability of its customers to make required payments.  The Company determines its reserves by both specific identification of customer accounts where appropriate and the application of historical loss experience to non-specific accounts.  If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances could possibly be required.

Revenue Recognition

The Company recognizes revenue in accordance with the guidance in ASC 605, "Revenue Recognition".   Revenue from advertisement sales is recognized on a contract basis and is earned over the life of the contract as the services for advertising are performed.

Revenue from road construction is recognized when the work is completed and accepted by the purchaser.  The contracts are usually of a short duration.  If the contracts are longer than one year, the Company recognizes income on the percentage of completion method.  The Company is also subject to the risk of currency fluctuations that may affect the prices paid for goods and the amounts received for revenue.

Income Taxes

Income taxes are accounted for under ASC 740, "Income Taxes".  In accordance with ASC 740, liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as measured by enacted tax rates that are expected to be in effect in the periods when the deferred tax assets and liabilities are expected to be settled or realized.  Significant judgment is required in determining the worldwide provisions for income taxes.  In the ordinary course of a global business, the ultimate tax outcome is uncertain for many transactions.  It is the Company’s policy to establish provisions for taxes that may become payable in future years as a result of an examination by tax autho rities.  The Company establishes the provisions based upon management’s assessment of exposure associated with permanent tax differences and tax credits applied to temporary difference adjustments.  The tax provisions are analyzed periodically (at least quarterly) and adjustments are made as events occur that warrant adjustments to those provisions.

Variable Interest Entities

The Company consolidates variable interest entities ("VIE") of which the Company is the primary beneficiary. The liabilities recognized as a result of consolidating these VIEs do not necessarily represent additional claims on the Company's general assets; rather, they represent claims against the specific assets of the consolidated VIEs.   Conversely, assets recognized as a result of consolidating these VIEs do not represent additional assets that could be used to satisfy claims against the Company's general assets.

Business Combinations

During 2009, the Company adopted the revised accounting guidance related to business combinations. This guidance requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the literature.  In accordance with this guidance, acquisition-related costs, including restructuring costs,  must be recognized separately from the acquisition and will generally be expensed as incurred.  That replaces the cost-allocation process detailed in previous accounting literature, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair values.  

-22-

Foreign currency accounting

The financial position and results of operations of our foreign subsidiaries in the Republic of Moldova and Romania are measured using the foreign subsidiaries’ local currencies, the Moldovan and Romanian lei and the euro, as the functional currencies since those are the currency of the primary environment in which those companies generate their revenues and expenses.  Revenues and expenses of such subsidiaries are translated into U.S. dollars at average exchange rates prevailing during the period. Assets and liabilities are translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of shareholders’ equity. The amount of future translation gains or losses will be affected by any changes in the exchange rate between t he lei and the U.S. dollar.

Although our Moldovan and Romanian subsidiaries incur most of their expenses in the lei and euro, many of their sales are to customers outside of Moldova and are therefore denominated in currencies other than the lei or euro (principally the U.S. dollar).  Additionally, our Moldova subsidiaries have certain bank loans that are denominated in U.S. dollars, and make certain purchases that are denominated in U.S. dollars.  As required by ASC 830-10-15, "Foreign Currency Matters", at the time of such a U.S dollar denominated transaction the subsidiary records the revenue and related receivable, or the bank debt or other liability, in lei on the basis of the exchange rate in effect on the date of the transaction.  However, if the exchange rate between the lei and the currency in which the transaction is denominate d changes between the date of the original transaction and the date the resulting receivable is collected or liability is paid, the amount received or paid, when converted to lei, will be different than the receivable or liability originally recorded, resulting in a foreign currency transaction gain or loss which is recorded in the results of operations.  Additionally, at the end of each reporting period the lei and euro amounts for the receivables, bank debts and accounts payable of our Moldova and Romanian subsidiaries that are denominated in U.S. dollars are adjusted to reflect the amount in lei or euros expected to be received or paid when the receivable is collected or the liability settled on the basis of the exchange rate at the end of the period. These adjustments also produce foreign currency transaction gains or losses which are recorded in the results of operations.

As a result, in periods in which the value of the lei and euro increases against the value of the U.S. dollar, we will recognize a net foreign currency transaction gain if our Moldova and Romanian subsidiaries have U.S. dollar denominated liabilities that exceed their U.S. dollar denominated receivables, or we will incur a net foreign currency transaction loss if our Moldova and Romanian subsidiaries have U.S. dollar denominated receivables that exceed their U.S. dollar denominated liabilities. Conversely, in periods in which the value of the lei and euro declines against the value of the U.S. dollar, we will incur a net foreign currency transaction loss if our Moldova and Romanian subsidiaries have U.S. dollar denominated liabilities that exceed their U.S. dollar denominated receivables, or we will recognize a net foreign currency transa ction gain if our Moldova and Romanian subsidiaries have U.S. dollar denominated receivables that exceed their U.S. dollar denominated liabilities.

The amount of these gains or losses will depend on the amount, if any, by which the U.S. dollar denominated receivables of our Moldova and Romanian subsidiaries exceed their U.S. dollar denominated liabilities, or vice versa, and the amount, if any, by which the value of the lei and euro changes against the value of the U.S. dollar. We cannot predict the amount, if any, by which the lei and euro will increase or decrease in value against the U.S. dollar. Additionally, the amount of the U.S. dollar denominated receivables and liabilities of our Moldova and Romanian subsidiaries will vary from period to period.

Recent Accounting Pronouncements

The Company’s significant accounting policies are summarized in Note 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.  There were no significant changes to these accounting policies during the six months ended June 30, 2010 and the Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.

Trends Affecting our Business

The Company believes the key factors affecting the Company's first quarter 2010 and/or future results include the following:

· The Company's media business revenues were stagnant during the first six months of 2010 due to late planning of advertising budgets by our larger clients.  The major clients began to place advertising with our TV channels TNT and TV7 during the latter part of the first quarter and the Company expects growth throughout the year.

· The Company's media business operations were impacted during the first six months due to increased costs as the media business increased focus on the production of high quality broadcasting, which required purchases of more expensive services.

· The Company's media business experienced increased competition from new TV channels during the first six months of 2010 that may affect future operations throughout 2010.

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Results of Operations

Six Months ended June 30, 2010 compared to the Six Months ended June 30, 2009.

REVENUES. Revenues from continuing operations for the six month period ended June 30, 2010, increased by $220,889 or 18% to $1,439,094 as compared to $1,218,205 during the comparable period of 2009. Overall growth of our media business was primarily stagnant during the first quarter of 2010 due to the late planning of advertising budgets by our larger clients.  The major clients began to place advertising with our TV channels TNT and TV7 during the latter part of the first quarter of 2010.  Revenues from the discontinued operations of Genesis subsidiary were $283,333 for the six month period ended June 30, 2010.

COST OF SALES. Cost of sales from continuing operations for our media business increased by approximately $360,021 or 55% to $1,012,432 for the six month period ending June 30, 2010, from $652,411 for the comparable period in 2009.  The increase is primarily attributable to increases in retransmitting rights from NTV and TNT Russian channels.

    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and administrative expenses for our media businesses decreased by $34,872 or 6.3% to $514,790 for the six month period ending June 30, 2010 from $549,662 for the comparable period in 2009.

LOSS FROM OPERATIONS.  As a result of the launch of the new project, the loss from media operations for the six months ended June 30, 2010 was $79,531 as compared to a profit of $126,857 for the comparable period in 2009. For Genesis, the loss from operations for the first six months of 2010 was $1,477,882.

OTHER ITEMS. Other income decreased from $111,569 in the six months ended June 30, 2009 to $8,597 in the current period.  The decrease is primarily due to less interest income earned on cash balances.

INCOME TAXES. Income taxes were not provided for the periods ended June 30, 2010 and June 30, 2009 as the Moldovan tax rate was 0% for 2009 and the Company incurred losses during 2010.

Three Months ended June 30, 2010 compared to the Three Months ended June 30, 2009.

REVENUES. Revenues from continuing operations for the three month period ended June 30, 2010, increased by $210,256 or 17% to $839,655 as compared to $629,399 during the comparable period of 2009.  The major clients began to place advertising with our TV channels TNT and TV7 during the latter part of the first quarter of 2010.  Revenues from the discontinued operations of Genesis subsidiary were $283,333 for the three month period ended June 30, 2010.

COST OF SALES. Cost of sales from continuing operations for our media business increased by approximately $126,585 or 19% to $490,500 for the three month period ending June 30, 2010, from $363,915 for the comparable period in 2009.  The increase is primarily attributable to increases in retransmitting rights from NTV and TNT Russian channels.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and administrative expenses for our media businesses increased by $186,882 or 34% to $247,039 for the three month period ending June 30, 2010 from $60,157 for the comparable period in 2009.  The increase is primarily attributable to increases in professional fees and office support expenses in connection with the new studio at TV7 and new office space at TNT.

LOSS FROM OPERATIONS.  We had earnings from media operations of $105,350 for the three months ended June 30, 2010 as compared to earnings of $260,498 for the comparable period in 2009. For Genesis, the loss from discontinued operations for the three month period ended June 30, 2010 was $1,150,207.

OTHER ITEMS. Other income decreased from $55,321 in the three months ended June 30, 2009 to $3,234 in the current period.  The decrease is primarily due to less interest income earned on cash balances.

INCOME TAXES. Income taxes were not provided for the periods ended June 30, 2010 and June 30, 2009 as the Moldovan tax rate was 0% for 2009 and the Company used net operating loss carry forward in 2010.

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LIQUIDITY AND CAPITAL RESOURCES

In October 2009, the Company consummated an acquisition of 60% of the outstanding shares of SC Genesis International S.A. owned by IPA International Project Establishment. The consideration paid by the Company for the acquisition of Genesis was approximately $4,800,000.  The acquisition has been accounted for using the purchase method of accounting, and accordingly, the results of operations of Genesis are included in the consolidated financial statements from October 1, 2009. In February 2010, the Company acquired an additional 20% of the outstanding common stock of SC Genesis International S.A. held by the noncontrolling interests in exchange for 1,250,000 shares of common stock of the Company, valued at $500,000, the fair value of the common stock at the date of issuance.  As of June 30, 2010, the Company ow ned 80% of SC Genesis International S.A. On August 3, 2010, the Company entered into an agreement for the purchase by a third party of the eighty (80%) percent of the outstanding shares of SC Genesis International S.A. owned by the Company.  The consideration for the sale is the assignment and transfer to the Company by certain of the Company’s shareholders of 8,413,400 shares of the Company’s common stock.  The closing will be consummated during the third quarter of 2010.

During the first six months of 2010, the Company has funded its capital requirements primarily through operating activities.  As of June 30, 2010 the Company had a cash balance of $356,569. This compares with a cash balance of $647,861 at December 31, 2009.  The Company expects cash flow from operations to fund the Company’s media operating activities for the next twelve months.

The Company had a working capital deficiency of approximately $2.1 million and a stockholders’ equity of approximately $8.7 million as of June 30, 2010.  Cash and cash equivalents decreased approximately $291,000 for the six months ended June 30, 2010.  The decrease is primarily attributable to net cash used in operations of $204,288 and net repayments of debt of $125,333, offset by proceeds from the sale of marketable securities of $78,101.

Accounts receivable, net of allowances, were $663,344 at June 30, 2010 as compared to $3,578,358 at December 31, 2009.  The decrease is primarily due to increased collection as the economy has improved in Eastern Europe.

Accounts payable and accrued expenses were $2,091,696 as of June 30, 2010 as compared to $4,151,982 at December 31, 2009.  The decrease is primarily attributable to funds collected from outstanding receivables used to pay down current payables.

Customer deposits were $162,700 as of June 30, 2010 as compared to $552,851 at December 31, 2009.  The decrease is primarily due to completed projects in 2010 that enabled the Company to apply customer deposits against receivables.

Off Balance Sheet Arrangements

We do not currently have any off balance sheet arrangements falling within the definition of Item 303(a) of Regulation S-K.

Inflation

To date inflation has not had a material impact on our operations.

ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk.

Foreign Currency Risk - Our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. Because our revenue is reported in U.S. dollars, fluctuating exchange rates of the local currencies, when converted into U.S. dollars, may have an adverse impact on our revenue and income. We have not hedged foreign currency exposures related to transactions denominated in currencies other than U.S. dollars. We do not engage in financial transactions for trading or speculative purposes.

Credit Risk - Our accounts receivables are subject, in the normal course of business, to collection risks. We regularly assess these risks and have established policies and business practices to protect against the adverse effects of collection risks. As a result we do not anticipate any material losses in this area.

ITEM 4T. Controls and Procedures.

As of June 30, 2010, the end of the period covered by this quarterly report, the Chief Executive and Chief Financial Officer of the Company (the “Certifying Officer”) conducted an evaluation of the Company’s disclosure controls and procedures.  As defined under Sections 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitat ion, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Certifying Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, the Certifying Officer has concluded that the Company’s disclosure controls and procedures were effective to ensure that material information is recorded, processed, summarized and reported by management of the Company on a timely basis in order to comply with the Company’s disclosure obligations under the Exchange Act, and the rules and regulations promulgated there under.

Further, there were no changes in the Company’s internal control over financial reporting during the second fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II

Other Information

Item 1. Legal Proceedings.

The Company is a defendant in a lawsuit captioned Case File No. 44.952/3/2007, Compania Nationala de Autostrazi si Drumuri Nationale in Romania ("CNADR") vs. Genesis International S.A., brought before ICCJ - Commercial Department.  CNADR has asked the court for the Company to pay $217,238 as a penalty for delay in the execution of the works set forth in Contract No. 2187/2003 - "Primary Rehabilitation of DN 58 Caransebes - Anina" and in Contract No. 2185/2003 - "Primary Rehabilitation of DN 41 Dara - Oltenita".  On April 15, 2010, the Supreme Court annulled the case file.  The communication is expected to be drafted and presented within one month.

We are a defendant in Case File No. 13704/302/2009, SC Trans AMD Company SRL vs. Genesis, brought in the District No.5, Bucharest Court of Law. The object of the hearing is the collection letter for the amount of 61,507 RON or the equivalent of $20,948. The plaintiff’s request has been partially admitted on February 10, 2010, and we have accrued and plan to pay this obligation.

We are a defendant in Case File No. 14657/3/2010, SC Angely Construct SRL vs. Genesis. The object of the hearing is the recovery of the amount of 495,169 RON or the equivalent of $168,648. A hearing was set for September 23, 2010. We have accrued and plan to pay this obligation.

Item 6. Exhibits.

31	Certification of Chief Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a)
32	Certification of Chief Executive Officer and Principal Financial Officer  pursuant to 18 U.S.C. Section 1350

SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	EMERGING MEDIA HOLDINGS, INC. (Registrant)
Date: August 16, 2010	By:	/s/ Iurie Bordian
		Iurie Bordian, Chief Executive Officer and Chief Financial Officer

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